Oil rises after U.S. election as Iran war risks persist
Brent crude rose 1.6% to $96.15 a barrel on Thursday, while U.S. West Texas Intermediate gained 0.6% to $88.64. Investors weighed how Republican losses in the…
LONDON — Brent crude rose $1.53, or 1.6%, to $96.15 a barrel on Thursday as investors weighed how the U.S. midterm election result could shape the war with Iran. U.S. West Texas Intermediate futures gained 52 cents, or 0.6%, to $88.64.
The rebound followed a steep drop. Both benchmarks fell by more than 8% in the previous session, settling at their lowest levels since August 31. Now, traders are weighing whether political pressure could hasten an end to the conflict or leave the region facing more uncertainty.
Why did oil rise after the U.S. election?
Investors are assessing President Donald Trump’s next steps after his Republican Party suffered heavy losses in this week’s midterm elections. The conflict with Iran, launched by Trump alongside Israel in February, and higher fuel prices for U.S. consumers were major grievances for voters.
“The situation in the Middle East is still unresolved and that's why there is some modest recovery in prices at the moment,” Giovanni Staunovo, a commodity analyst at UBS, said. He said Brent is more exposed to geopolitical factors, while WTI serves as a domestic U.S. benchmark.
June Goh, senior oil analyst at Sparta Commodities, said markets were pricing in a greater likelihood that the war could end. But she warned that the route to full diplomacy remained uncertain and that global strategic reserves had drawn very thin.
Uncertainty over Iran and oil shipments
The outcome of the election has not settled the outlook for the conflict. Uncertainty remains before the new Democratic-controlled Congress takes office in January. Citi said concerns persist that the White House could rely on its executive powers in foreign policy and potentially escalate the conflict with Iran.
Eurasia Group lowered its estimate for the chance of renewed U.S. strikes on Iran to 60% from 65%. It also cut the likelihood of a deal to 10% from 20%, citing Iran’s firm demands and the possibility that Trump would reject terms seen as a defeat. The group raised its estimate for a continued standoff to 30% from 15%.
The split between those outcomes matters for consumers because fuel prices in the United States were already a voter grievance. A renewed escalation could push crude higher, while a deal or a prolonged standoff would shape expectations differently. Eurasia Group said an escalation was likely to produce a sharper increase in Brent, into a band of $110 to $125 per barrel.
Iran’s Islamic Revolutionary Guard Corps said on Thursday that two oil tankers and a tugboat caught fire in separate incidents after trying to use unauthorized routes through the Strait of Hormuz. Crude shipments through the waterway, a key route for most Gulf oil supplies, have recovered to near pre-war levels, analysts said, though at higher cost.
Supply has recovered, but inventories are tight
The return of Gulf supply has pushed the global oil market back into surplus after months of war-related disruption, JPMorgan said in a note on Wednesday. The bank estimated the surplus reached 1.1 million barrels per day in September and widened to 1.4 million bpd in October, nearly matching last year’s average of 1.3 million bpd.
Yet commercial oil inventories in major consuming countries are near their lowest in 15 years, said Mukesh Sahdev, chief executive of energy consultancy XAnalysts. U.S. crude, gasoline and distillate inventories also fell last week as demand reached its highest in a year, the Energy Information Administration said on Wednesday.
Those supply and inventory figures leave prices exposed to further disruption even as shipments recover. Staunovo’s explanation for Thursday’s move was more immediate: “The situation in the Middle East is still unresolved.”
